401(k)

Definition

A 401(k) is an employer-sponsored retirement plan that lets employees defer pre-tax (or Roth) salary into an investment account. Most employers match contributions up to a limit.

Why it matters in retirement

For most Americans, the 401(k) is the largest retirement asset they'll ever have. The decisions you make in your 50s — contribution rate, Roth vs traditional, investment selection, rollover timing — determine whether that account funds 20 years of retirement or 30.

Key Numbers — 2026

Contribution limit (2026): $23,500
Age 50+ catch-up: $7,500
Age 60–63 super catch-up: $11,250
Total 415(c) limit: $71,000

Pros

Pre-tax contributions reduce current tax
Employer match = instant return
High contribution limits
ERISA creditor protection

Cons

Limited investment menu
High fees in some plans
Early withdrawal 10% penalty before 59½
RMDs start at 73

Common mistakes

Not contributing enough to capture the full employer match
Rolling over to an IRA with worse investment options
Cashing out when changing jobs
Ignoring Roth 401(k) option in lower-income years

IRA

An Individual Retirement Account (IRA) is a self-directed retirement account with tax advantages. Traditional IRAs offer pre-tax contributio…

Roth IRA

A Roth IRA is an after-tax retirement account where contributions grow tax-free and qualified withdrawals are tax-free in retirement. Contri…

Pension

A pension (defined benefit plan) promises a specific monthly payment for life based on years of service and final salary. Contrast with defi…

Required Minimum Distributions (RMDs)

RMDs are mandatory annual withdrawals from traditional retirement accounts (IRA, 401(k), 403(b)) that begin at age 73 (rising to 75 in 2033)…

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